Passenger car volume in India dropped to 2.7 per cent in the FY19, the slowest growth in the past five years.
ET Intelligence Group: Vehicle sales in higher per capita income states such as Maharashtra, Gujarat, Delhi and Karnataka are shrinking faster than the industry average. Tapering demand from taxi aggregators and rising saturation among passenger car owners has hit vehicles sales growth.
The combined sales volume growth of the four states underperformed industry growth by 2-27 per cent in vehicle categories including two-wheelers, passenger cars, and medium and heavy commercial vehicles (MHCVs) in the March 2019 quarter, according to the data from industry agency SIAM. These four states account for nearly one-third of the total vehicle sales in India and contribute 36 per cent to the total GDP of India. Average per capita income of these four states is 55 per cent higher than India’s average of Rs 1.03 lakh.
The biggest slowdown in vehicle volume was in Maharashtra, followed by Gujarat and Delhi. Maharashtra is the largest market for passenger cars and MHCVs and second largest for the two-wheelers after Uttar Pradesh. Passenger vehicles volume in the state fell in three out of the four quarters of FY19, and two-wheeler volume slipped 30 per cent in March quarter, the second highest after Gujarat.
The slowdown in richer states has a major impact on scooters since the segment has a higher penetration in these markets. In FY19, the scooter sales fell 0.3 per cent to 67.2 lakh units, the first fall in thirteen years. The share of scooters in the total two-wheeler market fell by 150 basis points to 31.7 per cent in FY19.
Passenger car volume in India dropped to 2.7 per cent in the FY19, the slowest growth in the past five years. A senior official of the Federation of Automobile Dealers Associations said that large markets have reported a higher demand contraction compared with the rest of India due to higher dealer penetration, which becomes a double whammy in times of slowing demand as inventory levels rise faster. The auto dealership footprint in the more prosperous states is 25-35 per cent higher than the low-income states. The slowdown has increased the inventory levels by 3-5 weeks than the historical average.
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Tapering demand from the taxi aggregators, which were contributing nearly 30-35 per cent of the total incremental demand for the passenger cars in the past couple of years, also affected sales volume. A senior official of the leading car maker said demand from taxi aggregators, which were mainly expanding operations in the richer states, fell by 55,000-65,000 units in FY19 compared with the peak demand of 150,000 units two years ago.
Saturation in major markets is another major factor responsible for the slowdown in car demand. The penetration of passenger cars per 1,000 person in Delhi, Gujarat, and Maharashtra is at 98, 35 and 29, respectively, compared with India’s average of 21, according to Kotak Institutional Equities.
